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City National reports strong first quarter

City National Corp. said Thursday that its first-quarter profit more than doubled, with strong growth in deposits and declining provisions for losses on loans.

The largest bank based in Southern California said it earned $15.7 million, or 19 cents a share, up from $7.5 million, or 4 cents, in the year-earlier quarter. The full news release is here.

Revenue rose to $252 million from $192 million, helped by the acquisition of failed Imperial Capital Bank of La Jolla and a $1-million gain on sales of securities, compared with a $15-million net loss on securities sales a year earlier.

The results were released after the close of trading Thursday. City National shares had risen 64 cents earlier to $58.13.

The bank's chief executive, Russell Goldsmith, said he was encouraged by positive signs in the Southern California economy, including a slowing pace of job losses, the stabilization of the housing markets and upticks in trade and tourism.

The confidence of City National's business clients began slowly picking up last fall, Goldsmith said in an interview.

"It's not robust confidence but it's rising confidence," he said "More of them are looking for credit and talking about making investments."

However, Goldsmith added, many clients who have weathered the last few years in relatively good shape are still wary of expansion because of the harshness of the recession.

Nonperforming assets -- delinquent loans and foreclosed real estate -- remained high, totaling 3.3% of all of the bank's loans and foreclosed properties as of March 31. That was up from 2.65% a year earlier but -- in an encouraging sign -- lower than the 3.62% recorded at the end of December.

The amount of delinquent commercial real estate and construction loans on the bank's books declined, and City National set aside less money as a provision for loan losses and charged off fewer loans as uncollectible.

Excluding Imperial Capital loans covered by a loss-sharing agreement with the Federal Deposit Insurance Corp., City National's loan portfolio averaged $11.9 billion in the quarter -- a decline of 4% from a year earlier and 1% from the fourth quarter.

By contrast, deposits grew from an average of $12.8 billion a year earlier to $16.9 billion in the latest quarter, including $920 million in deposits from Imperial Capital.

Goldsmith noted that the quarter included buying back from the government $200 million in preferred securities, the remainder of a $400-million investment in City National by the Treasury Department's Troubled Asset Relief Program in November 2008.

On April 8, City National spent $18.5 million to repurchase stock warrants issued to the Treasury under TARP, ending its participation in the controversial program to bolster the nation's banks through injections of funds from Uncle Sam.

"We were glad they were there for us at the start and glad to see them leave," Goldsmith said.